Owners of the recently retired San Onofre Nuclear Generating Station are blaming the plant’s troubles on the manufacturer of faulty replacement steam generators in an effort to recover billions of dollars in costs and investments.

Plant operator and majority owner Southern California Edison notified generator manufacturer Mitsubishi Heavy Industries of Japan on Thursday that it would dispute the $137.5 million cap on liabilities under a generator contract and warranty agreement.

In the official notice of dispute, Edison “claims that Mitsubishi seriously breached the contract, totally and fundamentally failing to deliver what it promised.”

Mitsubishi asserts that the contract remains in effect and that the manufacturer is responsible only for the cost of equipment it supplied, said Frank Gillespie, a senior vice president for Mitsubishi’s nuclear unit in the U.S.

If Edison and Mitsubishi cannot reach an agreement directly within 90 days, the dispute would move to a three-member arbitration panel for resolution. Complete terms of the contract were not released because they are considered proprietary.

The dispute may help determine how much Southern California utility customers ultimately pay toward costly efforts to revive a plant that stopped producing power on Jan. 31, 2012.

Edison did not specify how much money it intends to seek from Mitsubishi but provided a broad outline of its claims. Mitsubishi has paid Edison $45 million so far under warranty provisions.

“Mitsubishi should be obligated to compensate Edison and the co-owners (of San Onofre) for the full measure of direct, indirect, incidental, special and consequential damages by Mitsubishi’s breach and failures,” Edison said in the notice.

In a statement released by Mitsubishi on Thursday night, allowing time for consideration by executives in Japan, the company vowed to aggressively defend itself and challenged the accuracy and legal basis of Edison's accusations.

Mitsubishi maintains that the generator contract specifically precluded consequential damages, such as replacement power costs.

Generators at the San Onofre plant were replaced starting in 2009. Instead of extending the life of the plant’s three-decade-old reactors, the botched project led to San Onofre’s retirement last month.

The plant was first shut down provisionally on Jan. 31, 2012, because of a radiation leak later traced to unprecedented wear on generator tubes carrying radioactive water.

Edison announced in June that it would retire and dismantle San Onofre, citing mounting expenses and uncertainty that safety regulators would accept a plan to restart one of the reactors at partial power.

Mitsubishi officials have expressed “disappointment” that Edison chose not pursue a plan to restart of the Unit 2 reactor.

Mitsubishi said it had devised repairs to resolve the rapid degradation of generators in the Unit 3 reactor.

Edison said the proposed repairs did not meet contract obligations.

Repair and replacement energy costs since the initial plant outage climbed beyond $700 million, as of March 31.

Southern California utility customers continue to be billed more than $700 million a year for plant operations and maintenance.

Edison has been collecting $120 million a year for the steam generator replacement project, while plant owners seek final authorization for the $768.5 million price tag.

Perhaps most pointedly, Edison has honed in on Mitsubishi’s failure to accurately predict steam flows that led to destructive vibrations within the steam generators, calling the outcome an “extreme departure” from industry safety standards.

The California Public Utilities Commission has begun tracking costs under an investigation that could result in refunds to customers, but the state agency has declined so far calls by consumer advocates to reduce authorized revenues for the plant.

San Diego Gas & Electric owns a 20 percent stake in the plant and is responsible for a corresponding share of plant costs.